The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.
OPINION

Citi’s lesson from history

The US bank recovered from a similar crisis in the early 1990s. But this time around it lacks strong leadership.

Euromoney's past coverage of Vikram Pandit



“The difference this time is that
the bank lacks leadership. Its
supine board, having permitted
a non-banker to dig it into the
hole, has now ditched him”





In 1990, then Citigroup chairman John Reed realized that the bank’s souring portfolio of bad commercial real estate loans was going to take it to the very brink of disaster. By the end of that year, tier 1 capital had fallen to 3.26% of assets, the Citigroup stock price had halved from a 20-year high to a 20-year low, banking regulators were camped in the boardroom and the legal documents for a collapse were being drafted.

Over the next two years, more problems emerged. The Office of the Comptroller of the Currency lambasted operations at Citigroup’s residential mortgage lending unit, which had pursued high-volume growth with low-documentation loans, sometimes not even checking if a borrower had any source of income. The bank was forced to re-state earnings.

What did Reed and his board do? They rolled up their sleeves and went to work.

Reed saw that, amid the deteriorating economy of the early 1990s, the most important requirement was to excel at the control aspects of banking – costs and credit quality – rather than pursuing revenue growth.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree